Science & Technology
Science and Technology
Science and Technology
Tue, December 9, 2008 Methode, Inc.: Methode Electronics, Inc. Reports Second-Quarter Fiscal Year 2009 Results
CHICAGO, IL--(Marketwire - December 9, 2008) - Methode Electronics, Inc. (
Second-Quarter Fiscal Year 2009
Methode's second-quarter fiscal year 2009 net sales decreased $11.9 million, or 8.9 percent, to $121.3 million from $133.2 million in the second-quarter fiscal year 2008. Net income decreased $6.1 million, or 69.3 percent, to $2.7 million, or $0.07 per share, in the second-quarter fiscal year 2009 compared to $8.8 million or $0.24 per share, in the second-quarter fiscal year 2008.
The decrease in net income is due to restructuring charges incurred this quarter compared to no restructuring charges in the fiscal year 2008 second quarter, lower sales attributable to the softening of the global economic environment, especially the effect on the North American auto market, and higher selling and administrative expenses related to the Hetronic acquisition and higher amortization expense for the TouchSensor and VEP acquisitions, partially offset by foreign currency exchange gains due to the strengthening U.S. dollar.
In the second quarter of fiscal year 2009, Automotive segment net sales were negatively impacted by anticipated lower Chrysler sales, and therefore, were also negatively impacted by price increases of $2.2 million compared to $3.7 million in the same period of fiscal 2008. The transfer of the Chrysler product is expected to be completed by the end of the third quarter of fiscal 2009.
In January 2008, Methode announced a restructuring of its U.S.-based automotive operations and the decision to discontinue producing certain legacy products in the Interconnect segment. The Company recorded a restructuring charge during the second-quarter fiscal year 2009 of $6.3 million ($4.0 million after tax), or $0.11 per share. The charge includes employee severance, impairment and accelerated depreciation for buildings and improvements, machinery and equipment and professional fees. Excluding the restructuring charges and the benefit of $2.2 million, or $0.04 per share, of Chrysler related price increases, Methode achieved net income of $5.4 million, or $0.15 per share, in the second-quarter fiscal year 2009 compared to $6.6 million, or $0.18 per share, in the same period of fiscal year 2008 excluding $3.7 million, or $0.06 per share, in Chrysler-related price increases. The Company expects to complete its restructuring during fiscal 2010.
Consolidated cost of products sold decreased $8.1 million, or 7.6 percent, to $97.8 million in the fiscal 2009 second quarter, compared to $105.9 million in the same period of fiscal year 2008. The decrease is due to lower Automotive segment sales volumes partially offset by improved Interconnect segment sales due to the acquisition of Hetronic. Cost of products sold as a percentage of sales was 80.6 percent and 79.5 percent in the second-quarter fiscal years 2009 and 2008, respectively.
Selling and administrative expenses increased $2.6 million, or 16.1 percent, to $18.7 million for the second-quarter fiscal year 2009, compared to $16.1 million in the prior-year period. The increase relates to the Hetronic acquisition, as well as higher amortization expense for the TouchSensor and VEP acquisitions. As a percentage of sales, selling and administrative expenses increased to 15.4 percent in the second-quarter fiscal year 2009, compared to 12.1 percent in the same period of fiscal year 2008.
Income tax was a benefit of 47.1 percent in the second quarter of fiscal 2009 due to restructuring charges and decreased earnings at the Company's U.S.-based businesses, causing a loss before income taxes, compared with income tax expense of 23.0 percent in the same period of fiscal year 2008. The effective tax rates for the second quarters of fiscal years 2009 and 2008 reflect utilization of foreign investment tax credits and the effect of lower tax rates on earnings of the Company's foreign operations and a higher percentage of earnings at those foreign operations.
As announced on September 18, 2008, Methode's board of directors approved a stock repurchase plan of up to three million shares of its outstanding common stock through fiscal year end 2010. During the second quarter of fiscal 2009, Methode repurchased 639,880 shares for $5.1 million at an average price of $8.03 per share.
Six-Month Period Ended November 1, 2008
For the six-month period ended November 1, 2008, net sales decreased $2.5 million, or 1.0 percent, to $255.8 million from $258.3 million for the six-month period ended October 27, 2007. Net income decreased $7.6 million, or 44.4 percent, to $9.5 million, or $0.25 per share, in the fiscal 2009 six-month period compared to $17.1 million, or $0.46 per share, in the fiscal 2008 six-month period.
The decrease in net income is due mainly to restructuring charges incurred in the fiscal 2009 six-month period compared to no restructuring charges in the fiscal 2008 six-month period, and higher selling and administrative expenses related to the Hetronic acquisition and higher amortization expense for the TouchSensor and VEP acquisitions in the fiscal 2009 six-month period, partially offset by Chrysler price increases and foreign currency exchange gains due to the strengthening U.S. dollar.
In the six-month period of fiscal year 2009, Automotive segment net sales were negatively impacted by anticipated lower Chrysler sales, but were also favorably impacted by price increases of $7.3 million in the first six months of fiscal 2009 compared to $5.0 million in the first six months of fiscal year 2008. Therefore, the first six-month period of fiscal year 2009 included six months of price increases, and the first six-month period of fiscal 2008 included only four months of price increases.
The Company recorded a restructuring charge during the six-month period of fiscal year 2009 of $11.2 million ($7.3 million after-tax), or $0.20 per share. Excluding the restructuring charges and the benefit of $7.3 million, or $0.12 per share, of Chrysler-related price increases, Methode achieved net income of $12.4 million, or $0.33 per share, in the first six months of fiscal year 2009 compared to $14.1 million, or $0.38 per share, in the same period of fiscal year 2008 excluding $5.0 million, or $0.08 per share, in Chrysler-related price increases.
Consolidated cost of products sold decreased $1.0 million, or 0.5 percent, to $203.2 million in the fiscal 2009 six-month period, compared to $204.2 million in the same period of fiscal year 2008. The decrease is due to lower sales volumes. Cost of products sold as a percentage of sales was 79.4 percent and 79.1 percent in the first six months of fiscal years 2009 and 2008, respectively.
Selling and administrative expenses increased $3.1 million, or 9.7 percent, to $35.2 million for the six months ended November 1, 2008, from $32.1 million for the six months ended October 27, 2007. The increase relates to the Hetronic acquisition, as well as higher amortization expense for the TouchSensor and VEP acquisitions. As a percentage of sales, selling and administrative expenses increased to 13.8 percent in the first six-months fiscal year 2009, compared to 12.4 percent in the same period of fiscal year 2008.
Income tax expense was 9.8 percent in the first six months of fiscal 2009 compared with 24.1 percent in the same period of fiscal year 2008 due to restructuring charges and decreased earnings at the Company's U.S.-based businesses, causing lower income before taxes. The effective tax rates for the first six months of fiscal years 2009 and 2008 reflect utilization of foreign investment tax credits and the effect of lower tax rates on earnings of the Company's foreign operations and a higher percentage of earnings at those foreign operations.
Management Comments
President and Chief Executive Officer Donald W. Duda said, "Despite an increasingly challenging economic situation and the severe downturn in the worldwide automotive industry, we are pleased with our second-quarter results. However, we anticipate that this environment will negatively impact our results in the third and fourth quarters of this fiscal year."
Duda added, "Our increasingly diversified business model, combined with our financial discipline, an expanding customer base and value added engineered solutions is expected to help Methode navigate through the current difficult economic environment. Methode's balance sheet, which includes $53 million in cash with no debt and a $75 million line of credit, places the Company in a strong financial position during this recession. Despite the challenges in the current environment, we will continue to make prudent investments and business decisions to service our customers and support Methode's long-term success."
Conference Call
The Company will conduct a conference call and Webcast to review financial and operational highlights led by its President and Chief Executive Officer, Donald W. Duda, and Chief Financial Officer, Douglas A. Koman, at 10:00 a.m. Central time today. To participate in the conference call, please dial (877) 852-6583 (domestic) or (719) 325-4842 (international) and provide passcode 5825443 at least five minutes prior to the start of the event. A simultaneous Webcast can be accessed through the Company's Web site, [ www.methode.com ], by selecting the Investor Relations page and then clicking on the "Webcast" icon. A replay of the conference call, as well as an MP3 download, will be available shortly after the call through December 16 by dialing (888) 203-1112 (domestic) or (719) 457-0820 and providing pass code 5825443. On the Internet, a replay will be available for seven days through the Company's Web site, [ www.methode.com ], by selecting the Investor Relations page and then clicking on the "Webcast" icon.
About Methode Electronics, Inc.
Methode Electronics, Inc. (
Methode Electronics, Inc. Financial Highlights (In thousands, except per share data, unaudited) Three Months Ended November 1, October 27, 2008 2007 ----------- ----------- Net sales $ 121,304 $ 133,239 Other income 959 527 Cost of products sold 97,815 105,900 Restructuring 6,284 - Selling and administrative expenses 18,650 16,107 Income from operations (486) 11,759 Interest, net 469 611 Other, net 1,853 (941) Income before income taxes 1,836 11,429 Income taxes (865) 2,623 Net income 2,701 8,806 Basic and diluted earnings per common share $ 0.07 $ 0.24 Average Number of Common Shares Outstanding: Basic 37,068 37,079 Diluted 37,551 37,467 Six Months Ended November 1, October 27, 2008 2007 ----------- ----------- Net sales $ 255,818 $ 258,248 Other income 1,692 673 Cost of products sold 203,245 204,235 Restructuring 11,201 - Selling and administrative expenses 35,102 32,071 Income from operations 7,962 22,615 Interest, net 1,003 1,047 Other, net 1,584 (1,161) Income before income taxes 10,549 22,501 Income taxes 1,032 5,423 Net income 9,517 17,078 Basic earnings per common share $ 0.26 $ 0.46 Diluted earnings per common share $ 0.25 $ 0.46 Average Number of Common Shares Outstanding: Basic 37,120 37,033 Diluted 37,584 37,476 Methode Electronics, Inc. Summary Balance Sheet (In thousands) November 1, April 28, 2008 2008 ----------- ----------- Cash $ 52,806 $ 104,305 Accounts receivable - net 73,599 85,805 Inventories 68,043 55,949 Other current assets 14,567 14,758 ----------- ----------- Total Current Assets 209,015 260,817 Property, plant and equipment - net 80,404 90,280 Goodwill - net 68,085 54,476 Intangible assets - net 54,184 41,282 Other assets 26,144 23,365 ----------- ----------- Total Assets $ 437,832 $ 470,220 =========== =========== Accounts payable $ 32,922 $ 42,810 Other current liabilities 25,654 33,902 ----------- ----------- Total Current Liabilities 58,576 76,712 Other liabilities 21,772 20,723 Shareholders' equity 357,484 372,785 ----------- ----------- Total Liabilities and Shareholders' Equity $ 437,832 $ 470,220 =========== =========== Methode Electronics, Inc. Summary Statement of Cash Flow (In thousands) Six Months Ended November October 1, 27, 2008 2007 ---------- ---------- Operating Activities: Net income $ 9,517 $ 17,078 Provision for depreciation 12,489 9,939 Impairment of assets 3,177 0 Amortization of intangibles 3,052 2,739 Amortization of stock awards and stock options 1,605 1,602 Changes in operating assets and liabilities (1,160) 10,587 Other 735 174 ---------- ---------- Net Cash Provided by Operating Activities 29,415 42,119 Investing Activities: Purchases of property, plant and equipment (9,557) (10,082) Proceeds from sale of building - 960 Acquisitions of businesses (57,010) (7,696) Joint venture dividend - (1,000) Other (209) (346) ---------- ---------- Net Cash Used in Investing Activities (66,776) (18,164) Financing Activities: Repurchase of common stock (5,137) - Proceeds from exercise of stock options 110 1,145 Tax benefit from stock options and awards 46 190 Dividends (4,528) (3,781) ---------- ---------- Net Cash Used in Financing Activities (9,509) (2,446) Effect of foreign exchange rate changes on cash (4,629) 1,250 ---------- ---------- Increase (Decrease) in Cash and Cash Equivalents (51,499) 22,759 Cash and Cash Equivalents at Beginning of Period 104,305 60,091 ---------- ---------- Cash and Cash Equivalents at End of Period $ 52,806 $ 82,850
